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EasyJet suffers first profit drop since 2009 on terror, Brexit

Thu, Oct 06, 2016 - 2:39 PM

EasyJet Plc's annual profit fell for the first time since 2009 as a spate of terror attacks clipped demand and the decline of the pound following Britain's vote to quit the European Union inflated its foreign-currency costs.

PHOTO: REUTERS

[LONDON] EasyJet Plc's annual profit fell for the first time since 2009 as a spate of terror attacks clipped demand and the decline of the pound following Britain's vote to quit the European Union inflated its foreign-currency costs.

Pretax profit for the 12 months ended Sept 30 is expected to have been in the range of 490 million pounds to 495 million pounds (S$854 million-S$863 million), Luton, England-based EasyJet said in a trading update Thursday. That's about 28 per cent lower than the 686 million pounds generated in 2015.

EasyJet ceased providing full-year guidance after the June 23 Brexit decision, after initially saying earnings would match a consensus figure of 738 million pounds.

While the impact of the vote on demand remains tough to gauge, sterling's slide has bloated the fuel bill, paid in dollars, as well as EasyJet's euro-denominated costs. The stock has lost 35 per cent since the referendum.

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"We have been disproportionately affected by extraordinary events this year but our excellent network, cost control and revenue initiatives and our strong balance sheet underpin our confidence in the business," Chief Executive Officer Carolyn McCall said in the release.

Exchange-rate movements cost the airline about 90 million pounds in the year, an increase of 35 million pounds since the Brexit poll. Leisure sales have been hurt by terrorist violence spanning Nice to Turkey, with EasyJet ending flights to Sharm el-Sheikh, Egypt, entirely last November after a Russian jet was brought down by a suspected bomb.

Summer timetables were also disrupted by air traffic control strikes in France, where EasyJet is the second-largest carrier, and a glut of seats throughout European markets weighed on yields, a measure of average fares.

Ms McCall still intends to press on with growth plans as the same pressures hit other operators harder, among them Air Berlin Plc, cutting 1,200 jobs, Monarch Airlines Ltd, which is seeking a bailout, and TUI AG, currently exploring merger plans for its German airline arm.

"The current environment is tough for all airlines, but history shows that at times like this the strongest airlines become stronger," she said.

Analysts had been expecting a pretax profit of 516 million pounds for the 12 months, according to data compiled by Bloomberg.

EasyJet is exploring options for obtaining an air operator certificate outside Britain that would allow it to carry on flying between EU nations should the Brexit settlement fail to preserve flying rights as they stand now. The carrier says it will retain its UK AOC and keep its headquarters in the country.